Theresa May's silent decision to leave the EEA is setting up Britain for the worst of all possible Brexit deals

Theresa May.
REUTERS/Neil Hall
LONDON — Prime Minister Theresa May published her two-line bill today, and "Brexit" suddenly went from being an abstract protest vote last June to a real, concrete proposal that will definitely happen sometime in 2019.

After the House of Commons passes that bill, May will give notice under Article 50 in March. That apparently irrevocable decision will trigger a two-year period after which Britain will no longer be a member of the EU.

The referendum decision on June 23, 2016, was momentous. But May's unspoken decision — taken sometime after, it's unclear when — to abandon the European Economic Area (EEA) as well may end up being far more costly for Britain.

The EEA gives some non-EU countries trading rights in Europe. Britain can leave the EU and retain membership of the EEA, akin to Iceland, Liechtenstein, and Norway. It would give us access to the Single Market and retention of financial passporting rights, while extracting us from some of the regulatory burdens and costs of membership.

Crucially, it would give Britain more control of its borders, which is the most important issue to those who voted Leave. But May has apparently made a decision to leave the EEA as well as the EU.

That "Hard Brexit" scenario leaves the UK with no access to the Single Market or the customs union. Trade barriers, taxes and tariffs with other EU countries would immediately go up, crippling Britain's export market. Several billion pounds will be wiped off our GDP, our economic growth will be stunted, and price inflation will render everyone in the UK poorer. Leaving the EEA in addition to the EU will likely kill off hundreds of thousands of jobs.

Astonishingly, that scenario appears to be exactly what May wants. It is not clear why May (and her lieutenants Philip Hammond, Boris Johnson, and David Davis) are so keen on this. It is akin to the scene in the Mel Brooks movie Blazing Saddles where the sheriff points a gun at his own head and threatens to shoot himself unless everyone else puts their weapons down.

Even Brexit campaigners made the case for the EEA

The EEA offers an alternative to this suicide dash.

Technically, EEA membership requires Britain to accept the four freedoms of the EU, including freedom of movement for EU migrants. But EEA membership includes an "emergency brake" provision on EU immigration.

"EEA countries are able to activate their 'emergency brake' unilaterally to suspend freedom of movement, rather than having to petition the Commission. Free movement of workers is a non-negotiable part of the EEA treaty, but Articles 112-3 of the EEA Agreement, give members 'safeguard measures' which allow parties to unilaterally take 'appropriate measures' if serious economic, societal or environmental difficulties are liable to persist."

"These are EEA members with significantly less potential influence than Britain, yet they have a significant power that we lack; the ability to suspend fundamental freedoms in time of strain," the LeaveHQ blog said in March 2016. The same group of campaigners repeatedly touted the EEA as a good alternative to the EU here, here, and here— to name a few.

"So the UKIP position is this. There is absolutely nothing to fear in terms of free trade because on D+1 we'll find ourselves part of the European Economic Area, and with a free trade deal, and we should use our membership of the EEA as a holding position from which we can negotiate as the European Union's biggest export market in the world."

Clearly, there is potential for flexibility with the EU when it comes to border controls.

And yet ... here we are. Leaving the EU and leaving the EEA.

Since the June 23 vote, there has been almost complete silence from May — and her fellow Leavers — on the EEA. The assumption is that although Leavers once favoured the EEA they now regard it as a clone of the EU in which Britain wouldn't get a vote but would have to follow all the EU's rules and pay all its costs.

In the future, when we look back at Brexit, it may well be that May's second, silent decision on the EEA had much more serious consequences than merely leaving the EU. But we won't find out how much it is going to cost us until we're already paying the price.

This column does not necessarily reflect the opinion of Business Insider.